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Figure out your finances
Get preapproved for a mortgage
Look for a house
Make an offer
How to save on homeowners insurance
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The Cornhusker State is #5 in the nation for housing affordability, which makes for an enticing real estate market. A low cost of living, higher income potential, and the Midwestern lifestyle make Nebraska a great place to be a homeowner.
If you’re new to the Nebraska real estate market, or this is your first home buying experience, it can be intimidating to make your way through the process of buying a house.
Luckily, help is available right here—car insurance broker and comparison app Jerry has the answers to your questions. This guide for soon-to-be-homeowners goes over the steps of buying a house and takes a look at what Nebraska homeowners need to know.
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Figure out your finances
Determining your financial situation is the very first and most important step of buying a home in Nebraska. You shouldn’t start house hunting until you have a firm understanding of your debt-to-income (DTI) ratio, your credit score, and all of the fees and payments associated with the home buying process.
We know it’s tempting, but don’t check out Zillow quite yet. Before you start browsing, sit down with your bank statements, financial records, and a calculator to evaluate what kind of house you can afford in Nebraska.
Check your credit score
The most important number needed for buying a home may just be your credit score. You will want to check your credit score before doing all else in this process.
To buy a house in Nebraska, you should have a credit score of at least 620. You’ll especially want to meet this score if you’re planning on taking out a conventional mortgage loan to finance your new home.
If your credit score is lower than 620, there are other options available for you:
- You can qualify for a better mortgage by trying to build your credit. This may be the best option if you’re saving for the down payment. If you aren’t able to raise it in time, you can still qualify for your mortgage with a lower credit score.
- The Federal Housing Administration (FHA) and Veterans Administration (VA) have mortgage options for buyers with credit scores of 523 and 500, respectively. However, VA mortgages are available to veterans and active service members only.
Calculate your debt-to-income (DTI) ratio
Your debt-to-income (DTI) ratio is another crucial financial figure you’ll need to understand to buy a house. To calculate this ratio, you’ll need to add up all of your monthly payments and divide the total by your pre-tax income. The kinds of payments that go towards DTI include:
- Alimony or child support
- Car payments
- Credit card payments
- Rent or house payments
- Student loan payments
You’ll have a difficult time buying a house in Nebraska if your DTI is higher than 50%. You should shoot for a DTI of 36% or lower, particularly if you’re wanting a traditional mortgage.
Determine your down payment
Figuring out how big of a down payment you can make is a big part of determining what kind of house you’ll be able to afford. This will in part depend on the type of mortgage you’re expecting to get. Conventional mortgage loans generally require at least 20% for a down payment.
Can’t make the 20% down payment? The Veterans Administration (VA) or Federal Housing Administration (FHA) may have more affordable loan options for you. Here are the differences between the two:
- VA home loan: A mortgage insured by the VA, only available to veterans, active service members, and surviving spouses if eligible.
- FHA home loan: A mortgage insured by the FHA and designated for low-to-moderate-income home buyers, particularly first-time homeowners.
If your credit score is high enough (typically around 580), you can make a down payment as low as 3.5% on an FHA mortgage loan. You might even need to make a down payment at all if you qualify for a VA home loan! The VA also offers lower closing costs and competitive, low interest rates for those who qualify.
Prepare for closing costs and other fees
Since you’re getting ready to buy a house, you’ve probably heard the phrase “closing costs” before. How much should you really be prepared to pay upfront in addition to your down payment?
In Nebraska, homebuyers usually have to pay around 2-5% of the home’s total value in closing costs. Zillow’s Home Value Index shows that homes across the state sell for between $200,000 and $300,000 on average. If you buy a house in that price range, your closing costs should come out between $1,809 and $4,072 after taxes.
How do you get these totals? Here is what closing costs generally cover:
- Credit report fee
- Earnest money (a deposit that goes towards down payment)
- Home appraisal fee (required by most mortgage lenders)
- Home inspection fee
- Homeowners insurance
- Mortgage insurance
- Mortgage origination fee
- Property taxes
Property taxes in Nebraska average around 1.61%, but the precise percentage will depend on the county. For example, the property tax rates in Wheeler and Thomas counties are 0.94% and 1.02% respectively, but the rates in Douglas and Sarpy counties reach as high as 2.04% and 2.06%.
There’s good news if you’re trying to buy a house in a more expensive county. The Nebraska Investment Finance Authority offers a 10-year second mortgage of 5% to those buying their first home or those who haven’t owned a home in the past 3 years. The price of the home has to be under $225,000-$250,000, depending on the area, and eligibility depends on income.
Key Takeaway Make sure to check the property tax percentage rate in the county you want to live in.
Look for homeowners insurance
Homeowners insurance is a significant expense that isn’t just included in your closing costs—you’ll have to keep paying for your policy long after closing. In the U.S., the average price of homeowners insurance is $115 per month or $1,387 per year. The average price in Nebraska is higher at around $1,749 per year.
Remember: don’t sign up for the first homeowners policy you’re offered. You’ll want to shop around with at least three different providers to make sure you’re getting the lowest rate. One helpful hint is getting a quote from your auto insurance provider.
Insurance broker and comparison app Jerry makes it easy to compare rates: enter your information and let Jerry find competitive quotes from up to 50 trusted insurance companies!
Key Takeaway Evaluating finances is a vital first step to buying a house in Nebraska. Figure out your DTI, credit score, and savings for the down payment and closing costs before moving on to the next step.
Get preapproved for a mortgage
It’s still not quite time to open Zillow—you need to get prequalified for a mortgage next. You’ll gain a strong financial footing for later negotiations, plus a lot of sellers won’t even show you their properties unless you can provide documentation showing you have been preapproved.
This is how you get prequalified for a mortgage:
- Provide your Social Security number to your mortgage lender
- Create a list of all assets, banking information, debts, and employment history
- Fill out an application for a mortgage
Getting preapproved is pretty straightforward, but do not start the process until you are absolutely sure you’re ready to buy! Your mortgage lender will use all of the information you provide to verify your DTI and your ability to make mortgage payments. They will also perform a hard credit check, which can damage your credit score if you apply before you’re ready.
How to pick the right mortgage in Nebraska
The main considerations when picking a mortgage should be the mortgage term and interest rate. The most common mortgage terms are 15 years and 30 years.
If you choose a longer mortgage term, you’ll have lower monthly payments, but a higher interest rate (usually around 3.5%). With a shorter mortgage term, you’ll have higher monthly payments, but your interest rate can be as low as 2.5%. Make sure you compare mortgage options from different lenders before making your choice.
Look for a house
You’ve finally arrived at the part you’ve been waiting for: house hunting! Now that you evaluated your financial situation and you’re prequalified, you can start the most exciting part of buying a house.
Pick your city or neighborhood
When you’re deciding on a place to live, you’ll need to consider three things: climate, cost of living, and culture. Lincoln, Kearney, and Grand Island are current hot real estate markets in Nebraska.
If you already have an area in mind, go over the housing markets of different neighborhoods and decide what is of importance to you. Do you want to be in a good school district? Do you want to be close to downtown and nightlife? Be sure to take a look at crime rates and consider the cost of car insurance too.
Buyer’s market vs. seller’s market
You can shop smart in real estate if you know whether you’re looking at a buyer’s market or a seller’s market.
- You’re in a buyer’s market when the housing supply outweighs the demand, and you might be able to negotiate for a lower price on your house.
- In a seller’s market, more people are looking to buy than there are houses for sale.
Not sure how to tell what kind of market you’re in? Check out recent home sales to compare asking prices to final sale prices. It’s a seller’s market if the asking price is consistently lower than the final sale price.
Another good indicator of the market is time on the market. Houses are sold quickly in a seller’s market, but in a buyer’s market, they can remain available for weeks or even months.
As of January 1, 2022, Nebraska real estate is in a seller’s market. When you find a house you are interested in, it’s in your best interest to put in an offer to take advantage of the sale. Markets can shift quickly though! Research the markets in the areas you’re looking at when you start house hunting.
Find a real estate agent
Nebraska doesn’t require home buyers to hire a real estate agent, but they can be an extremely helpful resource in your house hunt. Look for an agent with plenty of experience in the neighborhood you want to live in and good communication skills.
Make an offer
You’ve found your dream house: time to put in your offer! A real estate agent can assist you with the necessary forms and determine the best offer to make based on the market. Next, you’ll be ready to make payment and move on as a new homeowner.
How to save on homeowners insurance
Finding homeowners insurance may not be the most exciting part of buying a house, but it’s an important part of the process. You’ll need homeowners insurance to cover your new home and odds are your mortgage lender will require you to have a policy.
Fortunately, finding the right policy for you and your new property has never been easier thanks to Jerry. The broker app compares competitive rates in under a minute to find the coverage you need with the savings you want. The average Jerry user saves $887 per year on car insurance alone, and you can save even more on both when you bundle your home and auto policies.
“It never occurred to me to look for more insurance quotes, but I’m so happy I saw Jerry. After using the app, I am saving $2000+ a year through my new Progressive plan. It blew my mind!” —Jarod M.
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How much money do I need to buy a house in Nebraska?
If you have a traditional mortgage loan, you’ll need to have a down payment of 20% of the home’s value and around 2-5% of the home’s value in closing costs. The average home in Nebraska sells for between $200,000 and $300,000, so you can reasonably expect to pay a total between $41,000 and $46,000 upfront.
What credit score is needed to buy a house in Nebraska?
There are low credit loans available, but to qualify for a conventional mortgage loan you’ll need a credit score of 620, at least.
What is the best place to buy a house in Nebraska?
Nebraska has a low cost of living, a few larger cities if you’re drawn to urban life, and has a low population density throughout the state. The best place for you will depend on what you’re looking for in terms of population, affordability, culture, risk level, and other factors.